Apple Inc 10-Q for FY2020 Q2

About this 10-Q

Headline figures

Apple Inc. (AAPL)

10-Q 2020-05-01 For: 2020-03-28

Added on April 01, 2026

Apple Inc filed this 10-Q on May 1, 2020, covering the quarter ended March 28, 2020 (FY2020 Q2).

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

Quarter ended March 28, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $58.31B; up 0.5% from $58.02B a year earlier
Net income: $11.25B; down 2.7% from net income of $11.56B a year earlier
Diluted EPS: $2.55; up 3.7% from $2.46 a year earlier

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California		94-2404110
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Apple Park Way
Cupertino	California	95014
(Address of principal executive offices)		(Zip Code)



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.00001 par value per share	AAPL	The Nasdaq Stock Market LLC
1.000% Notes due 2022	—	The Nasdaq Stock Market LLC
1.375% Notes due 2024	—	The Nasdaq Stock Market LLC
0.000% Notes due 2025	—	The Nasdaq Stock Market LLC
0.875% Notes due 2025	—	The Nasdaq Stock Market LLC
1.625% Notes due 2026	—	The Nasdaq Stock Market LLC
2.000% Notes due 2027	—	The Nasdaq Stock Market LLC
1.375% Notes due 2029	—	The Nasdaq Stock Market LLC
3.050% Notes due 2029	—	The Nasdaq Stock Market LLC
0.500% Notes due 2031	—	The Nasdaq Stock Market LLC
3.600% Notes due 2042	—	The Nasdaq Stock Market LLC



		Page
Part I
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	33
Part II
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	36



	Three Months Ended				Six Months Ended
	March 28, 2020		March 30, 2019		March 28, 2020		March 30, 2019
Net sales:
Products	$	44,965	$	46,565	$	124,069	$	120,000
Services	13,348		11,450		26,063		22,325
Total net sales	58,313		58,015		150,132		142,325

Cost of sales:
Products	31,321		32,047		83,396		80,285
Services	4,622		4,147		9,149		8,188
Total cost of sales	35,943		36,194		92,545		88,473
Gross margin	22,370		21,821		57,587		53,852

Operating expenses:
Research and development	4,565		3,948		9,016		7,850
Selling, general and administrative	4,952		4,458		10,149		9,241
Total operating expenses	9,517		8,406		19,165		17,091

Operating income	12,853		13,415		38,422		36,761
Other income/(expense), net	282		378		631		938
Income before provision for income taxes	13,135		13,793		39,053		37,699
Provision for income taxes	1,886		2,232		5,568		6,173
Net income	$	11,249	$	11,561	$	33,485	$	31,526

Earnings per share:
Basic	$	2.58	$	2.47	$	7.63	$	6.70
Diluted	$	2.55	$	2.46	$	7.56	$	6.66

Shares used in computing earnings per share:
Basic	4,360,101		4,674,071		4,387,570		4,704,945
Diluted	4,404,691		4,700,646		4,429,648		4,736,949



	March 28, 2020			September 28, 2019
ASSETS:
Current assets:
Cash and cash equivalents	$	40,174		$	48,844
Marketable securities	53,877			51,713
Accounts receivable, net	15,722			22,926
Inventories	3,334			4,106
Vendor non-trade receivables	14,955			22,878
Other current assets	15,691			12,352
Total current assets	143,753			162,819

Non-current assets:
Marketable securities	98,793			105,341
Property, plant and equipment, net	35,889			37,378
Other non-current assets	41,965			32,978
Total non-current assets	176,647			175,697
Total assets	$	320,400		$	338,516

LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	32,421		$	46,236
Other current liabilities	37,324			37,720
Deferred revenue	5,928			5,522
Commercial paper and repurchase agreement	10,029			5,980
Term debt	10,392			10,260
Total current liabilities	96,094			105,718

Non-current liabilities:
Term debt	89,086			91,807
Other non-current liabilities	56,795			50,503
Total non-current liabilities	145,881			142,310
Total liabilities	241,975			248,028

Commitments and contingencies

Shareholders’ equity:
Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 4,323,987 and 4,443,236 shares issued and outstanding, respectively	48,032			45,174
Retained earnings	33,182			45,898
Accumulated other comprehensive income/(loss)	(2,789		)	(584		)
Total shareholders’ equity	78,425			90,488
Total liabilities and shareholders’ equity	$	320,400		$	338,516


(1)	Products net sales include amortization of the deferred value of unspecified software upgrade rights, which are bundled in the sales price of the respective product.


(2)	Wearables, Home and Accessories net sales include sales of AirPods®, Apple TV®, Apple Watch®, Beats® products, HomePod™, iPod touch® and Apple-branded and third-party accessories.


(3)	Services net sales include sales from the Company’s digital content stores and streaming services, AppleCare®, licensing and other services. Services net sales also include amortization of the deferred value of Maps, Siri, and free iCloud storage and Apple TV + services, which are bundled in the sales price of certain products.



	March 28, 2020
	Adjusted Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash and Cash Equivalents		Current Marketable Securities		Non-Current Marketable Securities
Cash	$	24,405	$	—	$	—		$	24,405	$	24,405	$	—	$	—
Level 1 ⁽¹⁾:
Money market funds	4,473		—		—			4,473		4,473		—		—
Subtotal	4,473		—		—			4,473		4,473		—		—
Level 2 ⁽²⁾:
U.S. Treasury securities	18,755		405		—			19,160		1,042		6,736		11,382
U.S. agency securities	6,079		12		(9		)	6,082		129		1,478		4,475
Non-U.S. government securities	18,548		97		(693		)	17,952		652		2,348		14,952
Certificates of deposit and time deposits	10,616		—		—			10,616		3,661		6,319		636
Commercial paper	15,690		—		—			15,690		5,653		10,037		—
Corporate debt securities	82,153		207		(2,177		)	80,183		159		25,708		54,316
Municipal securities	974		9		(1		)	982		—		53		929
Mortgage- and asset-backed securities	13,066		278		(43		)	13,301		—		1,198		12,103
Subtotal	165,881		1,008		(2,923		)	163,966		11,296		53,877		98,793
Total ⁽³⁾	$	194,759	$	1,008	$	(2,923	)	$	192,844	$	40,174	$	53,877	$	98,793



	September 28, 2019
	Adjusted Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash and Cash Equivalents		Current Marketable Securities		Non-Current Marketable Securities
Cash	$	12,204	$	—	$	—		$	12,204	$	12,204	$	—	$	—
Level 1 ⁽¹⁾:
Money market funds	15,897		—		—			15,897		15,897		—		—
Subtotal	15,897		—		—			15,897		15,897		—		—
Level 2 ⁽²⁾:
U.S. Treasury securities	30,293		33		(62		)	30,264		6,165		9,817		14,282
U.S. agency securities	9,767		1		(3		)	9,765		6,489		2,249		1,027
Non-U.S. government securities	19,821		337		(50		)	20,108		749		3,168		16,191
Certificates of deposit and time deposits	4,041		—		—			4,041		2,024		1,922		95
Commercial paper	12,433		—		—			12,433		5,193		7,240		—
Corporate debt securities	85,383		756		(92		)	86,047		123		26,127		59,797
Municipal securities	958		8		(1		)	965		—		68		897
Mortgage- and asset-backed securities	14,180		67		(73		)	14,174		—		1,122		13,052
Subtotal	176,876		1,202		(281		)	177,797		20,743		51,713		105,341
Total ⁽³⁾	$	204,977	$	1,202	$	(281	)	$	205,898	$	48,844	$	51,713	$	105,341


(1)	Level 1 fair value estimates are based on quoted prices in active markets for identical assets or liabilities.


(2)	Level 2 fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.



	March 28, 2020
	Fair Value of Derivatives Designated as Hedge Instruments		Fair Value of Derivatives Not Designated as Hedge Instruments		Total Fair Value
Derivative assets ⁽¹⁾:
Foreign exchange contracts	$	2,803	$	1,425	$	4,228
Interest rate contracts	$	1,709	$	—	$	1,709

Derivative liabilities ⁽²⁾:
Foreign exchange contracts	$	2,645	$	1,518	$	4,163
Interest rate contracts	$	66	$	—	$	66


(1)	The fair value of derivative assets is measured using Level 2 fair value inputs and is included in other current assets and other non-current assets in the Condensed Consolidated Balance Sheets.



	Three Months Ended						Six Months Ended
	March 28, 2020			March 30, 2019			March 28, 2020			March 30, 2019
Net income	$	11,249		$	11,561		$	33,485		$	31,526
Other comprehensive income/(loss):
Change in foreign currency translation, net of tax	(566		)	174			(364		)	96

Change in unrealized gains/losses on derivative instruments, net of tax:
Change in fair value of derivatives	(143		)	(50		)	(32		)	(384		)
Adjustment for net (gains)/losses realized and included in net income	634			(105		)	236			(63		)
Total change in unrealized gains/losses on derivative instruments	491			(155		)	204			(447		)

Change in unrealized gains/losses on marketable debt securities, net of tax:
Change in fair value of marketable debt securities	(2,325		)	2,042			(2,200		)	2,152
Adjustment for net (gains)/losses realized and included in net income	29			28			19			65
Total change in unrealized gains/losses on marketable debt securities	(2,296		)	2,070			(2,181		)	2,217

Total other comprehensive income/(loss)	(2,371		)	2,089			(2,341		)	1,866
Total comprehensive income	$	8,878		$	13,650		$	31,144		$	33,392



	Three Months Ended						Six Months Ended
	March 28, 2020			March 30, 2019			March 28, 2020			March 30, 2019
Total shareholders’ equity, beginning balances	$	89,531		$	117,892		$	90,488		$	107,147

Common stock and additional paid-in capital:
Beginning balances	45,972			40,970			45,174			40,201
Common stock issued	428			390			430			390
Common stock withheld related to net share settlement of equity awards	(101		)	(105		)	(1,052		)	(927		)
Share-based compensation	1,733			1,546			3,480			3,137
Ending balances	48,032			42,801			48,032			42,801

Retained earnings:
Beginning balances	43,977			80,510			45,898			70,400
Net income	11,249			11,561			33,485			31,526
Dividends and dividend equivalents declared	(3,432		)	(3,499		)	(6,917		)	(7,025		)
Common stock withheld related to net share settlement of equity awards	(96		)	(14		)	(632		)	(608		)
Common stock repurchased	(18,516		)	(24,000		)	(38,516		)	(32,236		)
Cumulative effects of changes in accounting principles	—			—			(136		)	2,501
Ending balances	33,182			64,558			33,182			64,558

Accumulated other comprehensive income/(loss):
Beginning balances	(418		)	(3,588		)	(584		)	(3,454		)
Other comprehensive income/(loss)	(2,371		)	2,089			(2,341		)	1,866
Cumulative effects of changes in accounting principles	—			—			136			89
Ending balances	(2,789		)	(1,499		)	(2,789		)	(1,499		)

Total shareholders’ equity, ending balances	$	78,425		$	105,860		$	78,425		$	105,860

Dividends and dividend equivalents declared per share or RSU	$	0.77		$	0.73		$	1.54		$	1.46



	Six Months Ended
	March 28, 2020			March 30, 2019
Cash, cash equivalents and restricted cash, beginning balances	$	50,224		$	25,913
Operating activities:
Net income	33,485			31,526
Adjustments to reconcile net income to cash generated by operating activities:
Depreciation and amortization	5,602			6,435
Share-based compensation expense	3,407			3,073
Deferred income tax benefit	(651		)	(124		)
Other	(259		)	(215		)
Changes in operating assets and liabilities:
Accounts receivable, net	7,284			8,094
Inventories	699			(1,006		)
Vendor non-trade receivables	7,923			14,616
Other current and non-current assets	(8,866		)	(717		)
Accounts payable	(13,520		)	(20,024		)
Deferred revenue	1,223			(540		)
Other current and non-current liabilities	7,500			(3,273		)
Cash generated by operating activities	43,827			37,845
Investing activities:
Purchases of marketable securities	(66,489		)	(13,854		)
Proceeds from maturities of marketable securities	39,738			16,880
Proceeds from sales of marketable securities	27,762			22,635
Payments for acquisition of property, plant and equipment	(3,960		)	(5,718		)
Payments made in connection with business acquisitions, net	(1,134		)	(291		)
Purchases of non-marketable securities	(146		)	(490		)
Other	(426		)	30
Cash generated by/(used in) investing activities	(4,655		)	19,192
Financing activities:
Proceeds from issuance of common stock	430			390
Payments for taxes related to net share settlement of equity awards	(1,566		)	(1,427		)
Payments for dividends and dividend equivalents	(6,914		)	(7,011		)
Repurchases of common stock	(39,280		)	(32,498		)
Proceeds from issuance of term debt, net	2,210			—
Repayments of term debt	(5,250		)	(2,500		)
Proceeds from/(Repayments of) commercial paper, net	1,518			(36		)
Proceeds from repurchase agreement	2,556			—
Other	(51		)	(51		)



	March 28, 2020
Carrying amounts of hedged assets/(liabilities):
Marketable securities ⁽²⁾	$	15,080
Fixed-rate debt ⁽³⁾	$	(27,439	)

Cumulative hedging adjustments included in the carrying amounts of hedged items:
Marketable securities carrying amount increases/(decreases)	$	(877	)
Fixed-rate debt carrying amount (increases)/decreases	$	(1,708	)


(2)	The fair value of derivative liabilities is measured using Level 2 fair value inputs and is included in other current liabilities and other non-current liabilities in the Condensed Consolidated Balance Sheets.


(1)	Gains and losses related to fair value hedges are included in OI&E in the Condensed Consolidated Statements of Operations.


(2)	The carrying amounts of marketable securities that are designated as hedged items in fair value hedges are included in current marketable securities and non-current marketable securities in the Condensed Consolidated Balance Sheet.


(3)	The carrying amounts of fixed-rate debt instruments that are designated as hedged items in fair value hedges are included in current term debt and non-current term debt in the Condensed Consolidated Balance Sheet.



	March 28, 2020				September 28, 2019
	Notional Amount		Credit Risk Amount		Notional Amount		Credit Risk Amount
Instruments designated as accounting hedges:
Foreign exchange contracts	$	59,198	$	2,803	$	61,795	$	1,798
Interest rate contracts	$	27,350	$	1,709	$	31,250	$	685

Instruments not designated as accounting hedges:
Foreign exchange contracts	$	91,165	$	1,425	$	76,868	$	323



	March 28, 2020			September 28, 2019
Land and buildings	$	17,856		$	17,085
Machinery, equipment and internal-use software	71,273			69,797
Leasehold improvements	9,614			9,075
Gross property, plant and equipment	98,743			95,957
Accumulated depreciation and amortization	(62,854		)	(58,579		)
Total property, plant and equipment, net	$	35,889		$	37,378



	March 28, 2020		September 28, 2019
Long-term taxes payable	$	28,188	$	29,545
Other non-current liabilities	28,607		20,958
Total other non-current liabilities	$	56,795	$	50,503



	Maturities (calendar year)			March 28, 2020								September 28, 2019
	Maturities (calendar year)			Amount (in millions)			Effective Interest Rate					Amount (in millions)			Effective Interest Rate
2013 – 2019 debt issuances:
Floating-rate notes	2020	–	2022	$	3,250			1.80%	–	2.81	%	$	4,250			2.25%	–	3.28	%
Fixed-rate 0.350% – 4.650% notes	2020	–	2049	92,554				0.28%	–	4.78	%	97,429				0.28%	–	4.78	%

First quarter 2020 debt issuance of €2.0 billion:
Fixed-rate 0.000% – 0.500% notes	2025	–	2031	2,164				0.03%	–	0.56	%	—						—	%
Total term debt				97,968								101,679

Unamortized premium/(discount) and issuance costs, net				(220		)						(224		)
Hedge accounting fair value adjustments				1,730								612
Less: Current portion of term debt				(10,392		)						(10,260		)
Total non-current portion of term debt				$	89,086							$	91,807



		Three Months Ended					Six Months Ended
Comprehensive Income Components	Financial Statement Line Items	March 28, 2020		March 30, 2019			March 28, 2020			March 30, 2019
Unrealized (gains)/losses on derivative instruments:
Foreign exchange contracts	Total net sales	$	34	$	(97	)	$	(63	)	$	(34	)
	Total cost of sales	12		(76		)	(159		)	(451		)
	Other income/(expense), net	771		52			548			448
Interest rate contracts	Other income/(expense), net	1		2			3			3
		818		(119		)	329			(34		)
Unrealized (gains)/losses on marketable debt securities	Other income/(expense), net	37		36			24			83
Total amounts reclassified from AOCI		$	855	$	(83	)	$	353		$	49



	Cumulative Foreign Currency Translation			Unrealized Gains/Losses on Derivative Instruments			Unrealized Gains/Losses on Marketable Debt Securities			Total
Balances as of September 28, 2019	$	(1,463	)	$	172		$	707		$	(584	)
Other comprehensive income/(loss) before reclassifications	(356		)	(151		)	(2,860		)	(3,367		)
Amounts reclassified from AOCI	—			329			24			353
Tax effect	(8		)	26			655			673
Other comprehensive income/(loss)	(364		)	204			(2,181		)	(2,341		)
Cumulative effect of change in accounting principle ⁽¹⁾	—			136			—			136
Balances as of March 28, 2020	$	(1,827	)	$	512		$	(1,474	)	$	(2,789	)


(1)	Refer to Note 1, “Summary of Significant Accounting Policies” for more information on the Company’s adoption of ASU 2017-12 at the beginning of the first quarter of 2020.



	Number of RSUs (in thousands)		Weighted-Average Grant Date Fair Value Per RSU		Aggregate Fair Value (in millions)
Balance as of September 28, 2019	81,517		$	169.18
RSUs granted	35,639		$	225.14
RSUs vested	(19,660	)	$	151.02
RSUs canceled	(2,316	)	$	187.21
Balance as of March 28, 2020	95,180		$	193.45	$	23,580



Lease-Related Assets and Liabilities	Financial Statement Line Items	March 28, 2020
Right-of-use assets:
Operating leases	Other non-current assets	$	8,097
Finance leases	Property, plant and equipment, net	631
Total right-of-use assets		$	8,728

Lease liabilities:
Operating leases	Other current liabilities	$	1,185
	Other non-current liabilities	7,421
Finance leases	Other current liabilities	19
	Other non-current liabilities	629
Total lease liabilities		$	9,254



	Operating Leases			Finance Leases			Total
2020 (remaining six months)	$	559		$	14		$	573
2021	1,428			40			1,468
2022	1,298			38			1,336
2023	1,091			49			1,140
2024	951			26			977
Thereafter	4,269			920			5,189
Total undiscounted liabilities	9,596			1,087			10,683
Less: Imputed interest	(990		)	(439		)	(1,429		)
Total lease liabilities	$	8,606		$	648		$	9,254



	March 28, 2020		September 28, 2019
Cash, cash equivalents and marketable securities ⁽¹⁾	$	192,844	$	205,898
Property, plant and equipment, net	$	35,889	$	37,378
Commercial paper and repurchase agreement	$	10,029	$	5,980
Total term debt	$	99,478	$	102,067
Working capital	$	47,659	$	57,101



Periods	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)
December 29, 2019 to February 1, 2020:
Open market and privately negotiated purchases	17,794	$	309.09	17,794

February 2, 2020 to February 29, 2020:
Open market and privately negotiated purchases	15,725	$	302.06	15,725

March 1, 2020 to March 28, 2020:
Open market and privately negotiated purchases	31,158	$	265.27	31,158
Total	64,677				$	40,353



		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Exhibit	Filing Date/ Period End Date
31.1*	Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer.
31.2*	Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer.
32.1**	Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer.
101*	Inline XBRL Document Set for the condensed consolidated financial statements and accompanying notes in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q.
104*	Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set.



April 30, 2020	Apple Inc.

	By:	/s/ Luca Maestri
		Luca Maestri
		Senior Vice President, Chief Financial Officer